We are targeting for a client within a certain radius of his business but it's difficult to check the actual ad positions as our IP is outside of that particular range.

It shouldn't be a problem. You can use the Ad Preview Tool to simulate searching from a different geographic region and you will have access to as much positional data as you need via Adwords reporting.

Would it be better to target Ďall locationí and use plenty of negative keywords to give the best coverage?

No way... the negative impact on serving your ads to all countries in the world when you can, I'm guessing, only sell to the UK market would be highly detrimental to your ROI and Quality Score.

our target is the UK only, so i thought we could target 'all of the uk i.e. England' and then use negative for areas which aren't required e.g. london, liverpool etc. I'm just not sure how accurate IP addresses are in the UK with respect to physical location of the computer so we could be missing out on potential customers who are within our set region but whose IP addresses are outside.